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China’s Lithium Dominance Threatened by Industry Nationalism in Latin America

It’s been called “white gold” in the mining industry. Latin America’s lithium deposits have become a new El Dorado, a commodity conquest China is angling to control.

Along with Australia and Chile, China is among the top three lithium producers in the world. The Asian nation also commands an estimated 80 percent of global electric-battery production, which is driving the current surge in demand for lithium.

China has injected billions into the economies of lithium-rich nations such as Chile, Argentina, and Bolivia over the past decade in a bid for preferential access to the mineral.

However, with Chile and Mexico being the latest to announce the nationalization of their lithium industries, China faces new challenges to its goal of controlling the “white gold” rush.

Latin American countries have a long history of botched attempts at making long-term profit from resource nationalization. It’s a cyclical phenomenon driven by commodity booms and inflated prices.

When the state takes control of industries, it not only creates more significant short-term revenue but it also comes with serious long-term setbacks.

Problems like lack of innovation, corruption, inefficiency, political in-fighting, and reduced investor interest have plagued nationalization efforts throughout the region since Hugo Chavez’s regime in Venezuela.

Epoch Times Photo
Venezuelan president Nicolas Maduro passes by a portrait of late Venezuelan president Hugo Chavez at the Federal Legislative Palace in Caracas, on Jan. 14, 2019. (Federico Parra/AFP/Getty Images)

Today, the commodity boom has come full circle during a new wave of leftist leaders in the region. Subsequently, some analysts say China’s grab for Latin America’s lithium is in for a rocky road ahead.

“Lithium is the hot new thing leftist governments want to nationalize,” Dr. Evan Ellis told The Epoch Times.

Ellis is a Latin America research professor for the U.S. Army War College Strategic Studies Institute. He says China’s projects will likely bear the brunt of political strife, especially with nationalistic governments. The aptly named “lithium triangle” nations of Argentina, Bolivia, and Chile have been battling disruptive, opposition-led protests for years.

This type of unrest often affects the mining sector. Poverty-stricken populations on the outskirts of billion-dollar foreign projects often become resentful due to a lack of benefits for local communities.

But, according to Ellis, China’s checkbook could still help move stuck projects forward.

In the lithium triangle, he said, “China has a role in all three ‘cookie jars.’” If enough Chinese money is involved, he thinks it could help “bend the rules.”

Eyes on Chile

Within the realm of global lithium producers, Chile is second only to Australia. It generates an estimated 26 percent of the world’s total supply from the Atacama desert, which holds the largest proven reserves at 9.3 million tons.

Though, unlike Australia, Chile is the number-one producer of lithium from brine extraction.

On April 20, Chilean president Gabriel Boric announced his administration would begin transferring the nation’s vast lithium operations from private sector giants like SQM and the U.S.-based Albemarle to a state-owned company.

Epoch Times Photo
Newly elected president Gabriel Boric speaks with the media in Santiago, Chile, on Dec. 20, 2021. (Marcelo Hernandez/Getty Images)

“This is the best chance we have at transitioning to a sustainable and developed economy. We can’t afford to waste it,” Boric said during a televised press conference.

Boric’s announcement arrives on the heels of Mexican president Andrés Manuel López Obrador’s decree, which handed over control of the nation’s lithium to a state-owned company in February this year.

“What we are doing now … is to nationalize lithium so that it cannot be exploited by foreigners from Russia, China, or the United States,” Obrador said during a press event in Sonora.

Boric’s similar proclamation caused waves in the international community. Chile has always been a solid investor bet due to its relative political stability and open cooperation with foreign businesses. The sudden shift in operations has drawn skepticism from analysts and officials, who question whether the country will remain a serious player in the lithium market.

Moreover, there are protests on the horizon for Chile’s mining sector due to the water-intensive nature of brine extraction.

“You might think we’re mining lithium for the ‘green energy’ transition. But the reality is, the concern doesn’t just arise from local community concerns. There are U.S. environmental groups that are very active in Chile, training activists how to oppose lithium mining,” professor John D. Graham said during a Wilson Center event on April 25.

Cautionary Tale

In Bolivia, nationalism of the mining sector, including lithium, has been a thorn in China’s side.

However, in January, President Luis Arce signed a $1 billion deal with Chinese firms Contemporary Amperex Technology Co. (CATL), Guangdong Brunp Recycling Technology Co. (BRUNP), and CMOC Group Ltd. for access to Bolivia’s highly sought-after lithium reserves in the Uyuni salt flats. China’s businesses will work alongside the state-owned lithium company YLB in hopes of producing 25,000 tons a year starting in 2025.

Evaporation pools for lithium
Evaporation pools for the extraction of lithium at the Salar de Uyuni, outside of Uyuni, Bolivia, on March 26, 2022. (Claudia Morales/Reuters)

But Ellis points to the repeatedly fumbled iron ore project in the Bolivian jungle, El Mutún, as an example of how money can’t buy everything in Latin America.

The Bolivian government awarded the Chinese company Sinosteel a project to extract iron ore in the mineral-rich El Mutún mountain in 2016. Production was scheduled to start in 2019. To date, the gates of the El Mutún facility remain closed.

Shifting priorities amid political regime changes during the pandemic and a never-ending series of kickbacks to departmental officials have been blamed for the lengthy stall in the $450 million contract.

It’s a pattern seen often in the region. Politics, civil unrest, and corruption can sink even the biggest projects.

Some locals predict a similar fate will befall China’s lithium deal with YLB.

“It always happens like this. There’s a lot of talk about a project, like at El Mutún, then nothing, ” Christian Vargas told The Epoch Times.

Vargas is a former professor of economics and lives in Bolivia’s largest city, Santa Cruz. He said his country’s leftist government has struggled to bring Bolivia’s lithium to the market for years.

“Chile produces more than us, even though our reserves are bigger,” he said, adding, “It’ll happen the same way [with lithium] in Uyuni. Every civil group will want their ‘cut,’ or they’ll stop the project.”

But a neighboring country within the lithium triangle has taken the lesson of failed nationalism to heart: Argentina.

“Argentina’s lithium sector has thrived through a decentralized, pro-market strategy,” said Benjamin Gedan, director of the Latin America program at The Wilson Center.

Gedan also pointed to “excessive state control” as the primary cause of Bolivia’s inability to bring its vast lithium resources to market.

Due to its pro-market approach, analysts predict Argentina could become one of the world’s foremost lithium producers over the next 10 years. However, like many nations in the region, the upcoming presidential election and frequent protests could threaten the emerging lithium club member.

Ellis said Argentina is a more promising business model for lithium in terms of extraction and industrialization on a larger scale, despite having the smallest reserves.

“It’s where China has the most access to go in and do what they want to get the lithium out,” he said.

Well, apparently for now, at least.

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